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4. Addition to Tax Under Section 6654
Section 6654(a) imposes an addition to tax upon an
individual for an underpayment of a required installment of
estimated tax. If the taxpayer assigns error to the
Commissioner’s determination that the taxpayer is liable for the
addition to tax, the Commissioner has the burden of producing
evidence to show that the addition to tax applies. See sec.
7491(c); Higbee v. Commissioner, supra at 438.
Under section 6654, the addition to tax is calculated with
reference to four required installment payments of the taxpayer’s
estimated tax liability. Sec. 6654(c)(1); Wheeler v.
Commissioner, 127 T.C. 200, 210 (2006). Each required
installment of estimated tax is equal to 25 percent of the
“required annual payment”. Sec. 6654(d)(1)(A). The required
annual payment is generally equal to the lesser of (1) 90 percent
of the tax shown on the individual’s return for that year (or, if
no return is filed, 90 percent of his or her tax for such year),
or (2) if the individual filed a return for the immediately
preceding taxable year, 100 percent of the tax shown on that
return. Sec. 6654(d)(1)(B); Wheeler v. Commissioner, supra at
210-211. A taxpayer has an obligation to pay estimated taxes for
a particular year only if he has a “required annual payment” for
that year. Wheeler v. Commissioner, supra at 211.
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Last modified: May 25, 2011